Scottish Industrial Energy Transformation Fund: guidance - competition three

Guidance notes and application forms for the third call of the Scottish Industrial Energy Transformation Fund (SIETF).

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Assessment phase

After submission

Once the competition window has closed, an initial sift will check receipt of mandatory documents – as noted on the application form – and broad questions of eligibility such as SIC, location and value of grant requested.

Then the assessment process will take into consideration the following factors to ensure a diverse spread of projects:

  • geographical area
  • technology
  • sub-sector
  • organisation type
  • project size

A broad principal will be to favour projects that clearly demonstrate a forward-looking transitional systems approach to decarbonising processes, or energy-intensive industrial operations and where these are being developed as part of a wider strategic approach to industrial transition planning, consistent with Scotland’s 2045 net zero target.

Each application will be assessed on potential to deliver energy efficiency and/or decarbonisation within the wider context of supporting the implementation of a range of emissions savings opportunities across a variety of industrial manufacturing subsectors.

Cost of carbon abatement is highly technology and site specific. Assessment covers different technologies, therefore cost of abatement may be a factor in similar technology deployment for similar processes/setose, the cost of abatement across the whole range of eligible projects cannot be directly compared.

Applications that demonstrate an intention to draw down funding to deploy a technology or carry out a study in the financial years 2022-3 and 2023-24 may be favoured in the assessment process because of clearer and more prompt deliverability.

Calculating project benefits

To raise the level of consistency of information between applications that assessors will see, it is it is advised to submit comparable quantified figures. These give a valuable benchmark within the technical evaluation process. It advisable to include some context to your calculations on key metrics which will include tons of carbon saved per annum.

Applicants must use location-based emissions when reporting any carbon savings methodology. Market based emissions can also be presented but only in addition to any location-based saving estimates.

Applicants are encouraged to use dual reporting if they wish to reflect their consumption of renewable energy. Emissions from electricity, including those consumed from the grid, should use location-based grid average emission factors. Arrangements for renewable electricity, e.g. Power Purchase Agreements or separate purchase of Renewable Energy Guarantees of Origin, should be presented using a market-based reporting approach. It is recommended that this is presented alongside the location-based figures.

Applicants must use UK Government published figures when calculating carbon emissions.

We may consider allowing additional carbon savings estimates using alternative methodologies, but only in addition to a standard methodology using UK Government annual emissions factors.

The above emission factors should be used at all times.

When using 'UK Government GHG Conversion Factors for Company Reporting', the applicant should follow the provided guidance prior to selecting the relevant conversion factor. Issues can arise if using the incorrect conversion factor, including over/under estimating carbon saving figures. Applicants should:

  • determine whether to use ‘net CV basis’ or ‘gross calorific value’ of fuels according to their data and then select the correct emissions factor. Gross calorific value is typically for purchase of fuels in the UK
  • also account for the transmission and distribution losses of the electricity they purchase, which occur between the power station and their site(s). Applicants should do so using the ‘transmission and distribution’ factors for UK electricity. This factor should be used in addition to the emission factor associated with grid electricity generation. The 2022 generation emission factor is 0.19338 kg CO2e per kWh. The 2022 transmission and distribution of that grid electricity is 0.01769 kg CO2e per kWh

Financial and commercial modelling (deployment projects only)

Applicants should present appropriate financial information to help demonstrate the financial and commercial merits of a project. The provision of more detailed financial information will help to explore the added value the grant funding brings and help to fully explain the merits of the project. More detail is required where projects influence product throughput and profit.

For this, we would expect to see a cash flow model that:

  • ties in to the figures set out in the application
  • covers the construction and commissioning period on a monthly basis and the operating period on a quarterly basis
  • includes all expected costs of the project (capital and operational costs, including any maintenance costs) with each line item shown separately, such that specific project costs outlined in the application can be tracked to the financial model
  • includes all expected revenues (including any incentives) and savings for the project with each line item shown separately over the lifetime of the project
  • includes any finance cashflows (debt/equity/grants/etc.), including a monthly drawdown profile of the construction and commissioning phase, interest payments and repayments
  • is dynamic (i.e. calculations would not contain hardcoded figures) and allows for sensitivity testing of key assumptions (including inflation)
  • includes return on investment calculations in the form of IRR, NPV and payback calculations, and the model should be able to show any debt servicing ratios where the project has external debt/equity
  • explains the basis of the assumptions made in the financial model (including costs, changes in usage/prices, inflation)
  • include any technical assumptions that feature within the model, e.g. boiler efficiency of currently installed heating system and coefficient of performance of heat pump. Sources of technical assumptions should be referenced

Contact

 SIETF@gov.scot

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